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DOWNLOAD SPRING 2024

Inside Spring 2024 Issue

Financial Institutions liable for ACH losses

Court Decision re ACH Losses

Federal court: Financial institution liable for ACH fraud losses

How do courts view financial institutions’ responsibility to monitor ACH transactions for potential fraud? This article discusses a recent case in which the U.S. District Court for the Eastern District of Virginia held a credit union liable for more than $500,000 in fraudulent ACH payments deposited into a member’s account and quickly withdrawn. The article notes that while there was little or no evidence that the credit union had actual knowledge of the scam, the court found that such knowledge was imputed to the credit union based on several factors. A sidebar explains what other courts have said on the issue: Studco Building Systems US, LLC v. 1st Advantage Federal Credit Union, No. 2:20-CV-417, 2023 WL 1926747 (E.D. Va. Jan. 12, 2023). Shapiro v. Wells Fargo Bank, No. 18-15014, 2019 U.S. App. LEXIS 35604 (11th Cir. Nov. 27, 2019).

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FAQs re selling mortgages on the secondary market

Know your risks
FAQs about selling mortgages on the secondary market

In an increasingly volatile marketplace, community banks need to be resourceful to take advantage of strategies that can help them maintain profitability and stability over time. This article discusses the practice of selling mortgage loans that a bank originated to secondary market investors. The article notes that while this can create a much-needed influx of cash, it’s important for the bank to understand and mitigate the risks.

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Final new rules to modernize CRA

Staying atop the new-and-improved CRA rules

Final rules to strengthen and modernize the Community Reinvestment Act were unveiled by the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation late last year. This article explains that, among other things, the new rules strive to adapt the CRA regulations to changes in the banking industry, including the expanded role of mobile and online banking. The article points out that all banks should reevaluate their CRA programs in light of the new rules, and prepare for any necessary adjustments.

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Brief summary of recent trends in banking

Spring 2024

In this brief summary of recent developments in the banking industry, we look at recent guidance on how to manage risks associated with buy now, pay later loans as well as recent guidance on managing the risks of venture loans. We also explain a recent proposed rule issued by the Consumer Financial Protection Bureau intended to rein in excessive overdraft fees charged by large banks.

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DOWNLOAD WINTER 2024

Inside Winter 2024 Issue

Postmortems of Failed Institutions

Learn From Past Mistakes

“Postmortems” on failed institutions are instructive for community banks
In the aftermath of three notable bank failures in 2023, federal banking regulators issued comprehensive reports detailing the underlying causes of those failures. The reports point out management shortcomings that led to the bank failures — as well as regulators’ plans to become more proactive in addressing bank risks. This article showcases some highlights of the three reports. It also suggests that banks should expect greater regulatory scrutiny in the future, particularly with respect to capital, liquidity risk and interest rate risk. A sidebar addresses the role of social media in liquidity risk.

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Using Data Visualization Software for BSA/AML Monitoring

What can visual analytics do for your bank?

Criminals are continuously looking for ways to use rapidly advancing technology for their own nefarious purposes. This is an ongoing issue for many community banks as they try to prevent money laundering and other crimes from happening within their operations. This article explains that banks need to protect themselves from criminal infiltration and ensure they remain in compliance with Bank Secrecy Act/Anti-Money Laundering (BSA/AML) laws and regulations. It suggests that using data visualization software to help detect possible crimes before they can take hold can be helpful in that effort.

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7 Ways of AI Banking Transformation

7 Ways AI is Transforming the Banking Industry

Artificial intelligence (AI) is impacting businesses in virtually every industry today, and banking is no exception. This article notes that banks of all sizes increasingly recognize AI’s potential to help them improve efficiency, reduce costs, enhance the customer experience and combat fraud. It offers seven examples of how banks are using AI, including in customer service, fraud prevention and underwriting decisions.

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Brief summary of recent trends in banking

Winter 2024

This brief summary of recent developments in banking lists eight critical elements of sound liquidity risk management from the 2010 “Interagency Policy Statement on Funding and Liquidity Risk Management (SR 10-06).” It also notes that some federal regulatory agencies are cracking down on “junk fees” charged by some banks and businesses. Finally, it raises an alarm about a recent virtual currency investment scam known as “pig butchering.”

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DOWNLOAD FALL 2023

Inside Fall 2023 Issue

Banks Are Most Affected by Fraud

Fraud in Banks - Are You Keeping Occupational Fraud Under Control?

According to the Association of Certified Fraud Examiners (ACFE), the banking and financial services industry consistently tops the list of industries most frequently affected by occupational fraud. Among other things, this article discusses several categories of occupational fraud as well as some common fraud schemes and detection methods. A brief sidebar summarizes the antifraud controls that were most effective in terms of reducing fraud losses and duration.

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Managing Commercial Real Estate Risk

How to Manage Commercial Real Estate Risk in the Post-Pandemic Era

Community banks, by their very nature, tend to have higher concentrations of commercial real estate (CRE) loans than larger institutions. This article explains that any concentration in certain types of loans, borrowers or collateral exposes banks to heightened risks, so banks need to be proactive in managing CRE concentration risk. It also points out that a confluence of recent trends has elevated CRE risks for many banks.

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Brief summary of recent trends in banking

Fall 2023

This brief summary of recent developments in banking discusses the risks and rewards for banks of doing business with marijuana-related businesses, explains new interagency guidance on managing third-party risk and warns banks to avoid engaging in “digital redlining.”

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Proactive Due Diligence on Loans Pays Off

Building Your Core Deposits

Building Your Core Deposits for the Long Term

Community banks need to stay at the top of their game to maintain both stability and profitability. This article points out that banks have many technological, regulatory and digital factors to consider in the effort to stay competitive. It notes that a key factor in that effort is to focus on growing core deposits and suggests several steps banks can take to attract and sustain deposits. These include recognizing the importance of branches and developing targeted services.

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DOWNLOAD SUMMER 2023

Inside Summer 2023 Issue

Recent Bank Failures Raise Regulatory Scrutiny

In the Wake of Bank Failures - Expect Increased Scrutiny from Regulators

The failures of Silicon Valley Bank and Signature Bank and the self-liquidation of Silvergate Bank in March 2023 served as wake-up calls for banking regulators and lawmakers. Although industry experts agree that steps must be taken to avoid similar failures in the future, they disagree over whether the solution is to implement stricter banking regulations or simply to improve oversight under existing regulations. This article suggests that, whatever the answer, banks can expect regulators to watch them more closely, particularly regarding capital, liquidity and interest rate risks.

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Avoid Jeopardizing Your SBA Guarantees

Don't Take Government Guarantees for Granted
How to avoid jeopardizing your SBA guarantees

Banks that participate in U.S. Small Business Administration (SBA) lending programs must comply with all SBA requirements and standards to ensure that the government will honor its loan guarantees. This article explains that these loans allow banks that follow prudent lending practices to expand customer base, reduce risk, boost lending capacity (the guaranteed portion of these loans doesn’t count toward a bank’s legal lending limit), and improve liquidity (the guaranteed portion can be sold on the secondary market).

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Brief summary of recent trends in banking

Summer 2023

In this brief summary of recent developments in banking, we look at two “junk fee” practices that the Consumer Financial Protection Bureau has deemed likely to be unlawful and discuss whether banks should amend their employee retirement plans in light of recent SECURE 2.0 Act of 2022 provisions.

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Proactive Due Diligence on Loans Pays Off

How Can Financial Due Diligence Support Your Loans?

Many currently problematic loans once looked good on paper — but now, aren’t worth the paper they’re printed on! This article points out that to ensure a bank doesn’t succumb to the lure of loans that seem to be — and are — too good to be true, it’s important to have a policy of conducting proactive due diligence practices from the start. It provides several steps to take and lists some common ratios that are useful in assessing risk. The article notes that due diligence is key in helping loan portfolios remain stable and profitable over time.

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DOWNLOAD WINTER 2023

Inside Winter 2023 Issue

8 tips for successful transition planning

Managing Transition Risk

Managing Transition Risk
8 tips for successful succession plan

One of the biggest challenges community banks face today is a shortage of banking talent. So, it’s critical for banks to develop a solid succession plan to manage transition risk. When key management personnel retire or leave unexpectedly, a succession plan helps ensure that the bank is prepared for the change and proactively addresses the vacancy.

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Managing Liquidity Risk

Stay on Top of Liquidity Risk

In an uncertain economy, with rampant inflation and other significant economic headwinds, it’s a good idea for community
banks to ensure their loans are based on sound funding sources and that the degree of liquidity risk they’re carrying is reasonable and manageable for the foreseeable future. This means your bank needs to have adequate procedures in place to mitigate risk and stay solvent through tough times.

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Is Blockchain the future of banking?

Is Blockchain the Future of Banking?

Blockchain, the technology behind Bitcoin and other cryptocurrencies, has been in the news a great deal in recent months. Headlines about the volatility of cryptocurrencies and their relative lack of regulatory oversight have generated wide- spread skepticism about the technology. But the uses of blockchain go well beyond cryptocurrency. And its potential benefits for banks have led many to believe that blockchain is poised to transform the industry.

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Interest Rate Risk

Monitoring and Managing Interest Rate Risk

For community banks, interest rate risk is a part of doing business, so it’s critical for banks to monitor that risk and take steps to control it. The “right” level of risk depends on several factors, including the size and complexity of a bank’s operations, as well as the sufficiency of its capital and liquidity to withstand the potential adverse impact of interest rate fluctuations.

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Brief summary of recent trends in banking

Winter 2023

In this issue we highlight the main points of the new NACHA rules that are effective September 16, 2022 for "Micro-Entries"and the fraud detection requirements that are effective march 17, 2023.We also discuss the federal banking agencies' new proposal to modernize their CRA regulations and the warning from the CFPB to lenders that use "black box" for credit decision making.
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DOWNLOAD FALL 2022

Inside Fall 2022 Issue

Managing Third-Party Risk

Are You Managing Third-Party Risk?

Banks increasingly are turning to outside vendors and partners to enhance their products and services, gain access to innovative technologies, benefit from expert advice, increase efficiency and reduce costs. This article notes that it’s important to have processes in place for managing the risks associated with these third-party relationships, and explains that federal banking regulators have high expectations for banks when it comes to third-party risk management. A sidebar summarizes recent Fintech due diligence guidance for community banks.
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Adding new business lines to increase earnings

How to Expand Options and Improve Your Bank's Bottom Line

Community banks continue to deal with economic uncertainty as a result of the COVID-19 pandemic and its impact on businesses and organizations. They’re also faced with an increasingly rapid pace of technological change affecting many aspects of banking. This article suggests that banks may want to consider adding some new business lines that can increase their fee income and help stabilize profits.
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Are you ready for a new cyberincident reporting rule?

Ready for the New Cyberincident Reporting Rule?

Banks are now required to report significant cyberincidents within 36 hours, under a new rule issued by the Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC). This article explains details of the rule and answers some frequently asked questions about it.
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Brief summary of recent trends in banking

Fall 2022

In this summary of recent developments in community banking, we highlight the main points of the Office of the Comptroller of the Currency’s latest installment of its Semiannual Risk Perspective, explain that the IRS has finalized its guidance on the tax consequences of the LIBOR transition and discuss the most recent ransomware advisory from the Financial Crimes Enforcement Network.
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DOWNLOAD SUMMER 2022

Inside Summer 2022 Issue

CECL adoption a bank priority

How to Expand Options and Improve Your Bank's Bottom Line

By now, all banks are familiar with the CECL model for estimating credit losses, and most have taken concrete steps toward adopting it. This article notes that banks that are behind schedule in their transition efforts need to kick those efforts into high gear. It explains that it’s also important for banks to evaluate — and, if necessary, update — their policies, procedures, systems and internal controls to ensure credit losses will be properly calculated and documented. A sidebar points out that the FASB has indicated that no further deferrals are expected.
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Stress testing - bank's potential risks

Under Stress - conduct stress testing to stay competitive

Stress testing enables banks to simulate specific “disaster” scenarios and evaluate the bank’s (or loan’s) potential for withstanding them in terms of earnings, capital adequacy and other financial metrics. This article explains that such testing can provide valuable information about potential risks that community banks can use to stay afloat through inevitable economic ups and downs.
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Is cryptocurrency in your bank's future plans?

Is cryptocurrency the future of banking?

The popularity of bitcoin, ether and other cryptocurrencies has exploded in recent years. But an absence of federal oversight “leaves consumers open to scams and dangerous price volatility,” many lawmakers warn. This article explains that this lack of oversight may change in the near future and discusses a recent executive order that signals support of the potential benefits of creating a U.S. Central Bank Digital Currency.
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Brief summary of recent trends in banking

Summer 2022

In this brief summary of recent developments in banking, we look at a recent Consumer Financial Protection Bureau announcement that it will expand its antidiscrimination efforts to situations in which fair lending laws may not apply, including include servicing, collections and consumer reporting. In addition, we explain the Financial Crimes Enforcement Network’s Rapid Response Program for cyber-enabled financial crime and highlight a recent FDIC notice requirement for banks involved in crypto activities.
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DOWNLOAD WINTER 2022

Inside Winter 2022 Issue

FINCEN's new AML/CFT priorities

FinCEN’s National AML/CFT priorities set the tone

In June 2021, the Financial Crimes Enforcement Network (FinCEN) issued its first set of government-wide priorities (the Priorities) for anti-money laundering and countering the financing of terrorism (AML/CFT). As required by the Anti-Money Laundering Act of 2020 (AML Act), the Priorities identify and describe the most significant AML/CFT threats currently facing the United States.
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Should your bank use third party vendors?

Re-imagining branch banking for the digital age

Keeping branch banking profitable in the digital age

The COVID-19 pandemic has led to an increase in online banking. However, the transition to
virtual banking was already well underway.As community banks look to the future, they need to
re-imagine branch banking for the digital age. This means strengthening what’s working and getting rid of what isn’t. Direct banking at branches can still be vital to community banks’ financial health as long as they measure branch performance and correct as necessary.
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Managing risk for online account opening

Your bank's cyberattack ransomware plan

What's your Bank's plan to counter ransomware attacks?

Cybersecurity continues to be a key risk that businesses face today, and banking is among the industries most affected by cyberattacks.Some experts estimate that around a quarter of all
malware attacks target financial institutions. Of particular concern are ransomware attacks, which have increased dramatically in the past couple of years.
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Brief summary of recent trends in banking

Winter 2022

In this summary of recent developments in banking, we discuss the new deadline for compliance with the CFPB’s revised general qualified mortgage rule and how banks should prepare, look at the new lease accounting rules, and take note of a new guide for banks published by the federal banking agencies on conducting due diligence on FinTech companies.
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DOWNLOAD FALL 2021

Inside Fall 2021 Issue

COVID-19's impact on your UDAAP Program

UDAP resurfaces- Is your bank in compliance?

The Dodd-Frank Act gives the Consumer Financial Protection Bureau (CFPB) broad authority to prosecute unfair, deceptive or abusive acts or practices (UDAAP) by banks and other financial providers. Early last year, the CFPB announced a new policy that gave institutions a reprieve from UDAAP enforcement actions. But in March 2021, it rescinded this policy, signaling a return to more aggressive enforcement.
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Improve customer satisfaction and retention

Keep your customers satisfied

Over the past few years, community banking has withstood rapid technological changes, unprecedented economic challenges during a pandemic and new demands from its customer
base. To maintain profitability amidst all this turmoil,you need to ensure that your bank retains its existing customers. After all, studies show that attracting a new customer typically costs five times more than retaining an existing one
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COVID-19's impact on bank's internal controls

Maintaining internal controls in a post-pandemic environment

Internal controls are the lifeblood of a bank’s risk management system. Weak or ineffective
controls can lead to operational losses and expose a bank to a higher risk of fraud. As we continue to recover from the COVID-19 pandemic, banks need to assess the pandemic’s impact on their internal control systems and make appropriate adjustments.
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Brief summary of recent trends in banking

Fall 2021

This brief summary of recent trends in banking highlights Consumer Financial Protection Bureau answers to FAQs on unauthorized electronic fund transfers and discusses a Federal Reserve tool that simplifies CECL implementation. It also notes the OCC’s intention to rescind a 2020 Community Reinvestment Act rule.
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